Purchasing a house is such a major financial decision, and full of excitement and emotions, that it may often lead to many financial oversights. If you are taking such a major financial decision for the first time, it is a good idea to stay informed of the most common mistakes made by others.
As one of the top 5 property websites in India, we share our experienced analysis and insights regularly to help you in your real estate journey. Here are the most essential financial mistakes you need to prepare against.
Four financial mistakes to avoid at all costs in your real estate journey
Downplaying the total costs
Often, buyers tend to overlook the hidden costs that a home-buying journey may entail. They rely too heavily on the quoted price and plan everything around the written price. In doing so, they overlook all the unsuspecting hidden costs that can add up in the long run. To give you a few examples: there are Stamp Duty (ranging from 5-8% depending on the State and local law), registration fees (1-2%), GST (5% for used and under-construction properties), brokerage (1-2%), and interior costs. All these factors can further inflate your budget by a striking 15-20%. Hence, you need to prepare with around 15-20 % more than the quoted price. However, you can also resort to some helpful hacks like the following:
- You can use an online calculator and AI-assistance to estimate your total expenses.
- To avoid GST, you can choose to opt for a ready-to-move-in property
Depending too much on your home loan
It might seem convenient to borrow the maximum loan amounts offered by the bank, but overborrowing than what your income can support could be a risky venture. Often, a job loss, medical emergency, or even an interest rate hike can interfere with your repayments. Hence, it is not a prudent idea to stretch your EMI beyond 30% of your monthly income.
You can take some proactive steps not to fall into this error, like:
- Limiting EMIs to 30-35% of your overall income
- Choosing a shorter tenure, like 15-20 years, to save on interest.
- Make a down payment of at least 20% to minimise your loan burden.
Skipping a closer inspection of the property
Often, in the excitement and delight, the buyers forget a closer inspection and other due diligence. Your investment can suffer horribly from a property with legal conflicts, unclear titles, or other pending dues. Here are some ways you can make it right and not avoid the due diligence:
- Verifying the builder’s RERA registration (You can check the state’s RERA portal).
- You need to ensure that the land is free of liens or other encroachments.
- It could be wise to confirm the utility approvals (like water, electricity, and sewage lines) to avoid future fines.
Not comparing home loans from different providers
Taking the first loan offer you receive could be disastrous in your real estate journey. You may as well miss out on many benefits. From interest rates to tenure, everything about a loan can significantly vary from bank to bank. The best financial planning would consist of exploring every possible option available and choosing what benefits you the most. Many real estate websites and housing finance companies mentor you to avail the best home loans. You can compare the offers from different banks and then choose to make a smart decision.
- Begin by comparing categories like the processing fees, prepayment penalties, and the foreclosure charges.
- If your credit score is high, you can negotiate for lower rates.
- Be on the lookout for Government subsidies like PMAY, which can give you up to ₹2.67 lakh.
If you are looking to take a home loan, at Kaastel, we guide the buyers to choose from the best home loan options offered by different banks. We also have a diverse property listing to fit every budget and for you to browse. You can also reach out to our agents and brokers to find all kinds of houses for sale and rent. We wish you a happy and smooth home-buying journey ahead.
